1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

9-12-1994

Beaser East, Inc. v. Mead Corp.

Precedential or Non-Precedential:

Docket 93-3372

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Recommended Citation

"Beaser East, Inc. v. Mead Corp." (1994). 1994 Decisions. Paper 130.

http://digitalcommons.law.villanova.edu/thirdcircuit_1994/130
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ___________ 

 No. 93-3372 

 ___________ 

 BEAZER EAST, INC., 

 Appellant 

 v. 

 THE MEAD CORPORATION, 

 Appellee 

 ___________ 

 Appeal from the United States District Court 

 for the Western District of Pennsylvania 

 (D.C. Civil Action No. 91-00408) 

 

 ___________ 

 Argued: February 15, 1994 

 PRESENT: BECKER, HUTCHINSON and COWEN, Circuit Judges

 (Filed September 12, 1994) 

 ____________ 

George E. Yokitis, Esquire 

Kenneth R. Bruce, Esquire 

Albert Bates, Jr., IV, Esquire 

Dean A. Calland, Esquire (Argued) 

Babst, Calland, Clements & Zomnir, P.C. 

8th Floor 

Two Gateway Center 

Pittsburgh, PA 15222 

 and 

Billie S. Flaherty, Esquire 

Beazer East, Inc. 

436 Seventh Avenue 

Pittsburgh, PA 15219 
 and 
Robert L. Schuftan, Esquire 

Wildman, Harrold, Allen & Dixon 

225 West Wacker Drive 

Chicago, IL 60606 

 Attorneys for Appellant 

Alan M. Wiseman, Esquire (Argued) 

Thomas A. Isaacson, Esquire 

Howrey & Simon 

1299 Pennsylvania Avenue, N.W. 

Washington, DC 20004-2402 

 and 

George P. Faines, Esquire 

John H. Bingler, Jr., Esquire 

Thorp, Reed & Armstrong 

One Riverfront Center 

Pittsburgh, PA 15222 

 Attorneys for Appellee 

 ____________ 

 OPINION OF THE COURT 

 ____________ 

HUTCHINSON, Circuit Judge. 

 Appellant, Beazer East, Inc. ("Beazer"), appeals an 

order of the United States District Court for the Western 

District of Pennsylvania dismissing Beazer's claims for indemnity 

and contribution. Beazer claimed appellee, The Mead Corporation 

("Mead"), was bound by a promise to pay Beazer all or part of 

Beazer's response costs on a Comprehensive Environmental Response 

Compensation and Liability Act, 42 U.S.C.A. § 9601-9675 (West 

1983 & Supp. 1994) ("CERCLA"), cleanup of a site Beazer's 

predecessor had acquired from Mead's predecessor. Instead, the 
district court granted summary judgment to Mead on Mead's 

counterclaim for indemnity from Beazer against Mead's response 

costs. In doing so, the district court adopted a United States 

Magistrate Judge's report and recommendation ("Magistrate Judge's 

Report"). The magistrate judge had concluded that Mead was a 

responsible party for purposes of CERCLA but that the asset 

purchase agreement ("Agreement") under which Beazer had acquired 

the site of the contaminated facility, the Woodward Facility Coke 

Plant (the "Woodward Facility" or "Coke Plant"), required Beazer 

to indemnify Mead against CERCLA liability. The magistrate judge 

reasoned that a provision for indemnification in a contract that 

predates CERCLA's enactment will govern the responsibility of the 

contracting parties inter se for payment of CERCLA cleanup costs 

if the indemnification or release provision is a general release 

from all liability arising out of a particular transfer or 

contains an unambiguous promise to indemnify against all 

liabilities that environmental law, present or future, may impose 

because of pollutants on the property transferred. The 

magistrate judge then concluded that the asset purchase agreement 

between Mead's predecessor, the seller, and Beazer's predecessor, 

the buyer of the contaminated site, unambiguously required Beazer 

to indemnify Mead against any liability for injury to the 

environment from substances on the property, including cleanup 

under CERCLA, no matter who polluted the site. The paragraph in 

question, Paragraph 4(c) of the agreement, required the buyer and 

its successors to assume and perform "[o]bligations of the Coke 

Plant to comply from and after the Closing Date with all of the 
terms and conditions of any . . . solid waste disposal permit, 

license or order, hereafter issued by the United States 

Environmental Protection Agency . . . in accordance with 

applications now pending and listed in Exhibit F hereto." 

Appellant's Appendix ("App.") at 23. 

 On appeal Beazer argues that the district court erred 

in concluding this indemnity provision was unambiguously broad 

enough to impose on it a general duty to indemnify Mead against 

all environmental liability under either state or federal common 

law concerning the construction of such contracts of indemnity. 

 We agree with the magistrate judge and the district 

court concerning the substance if not the source of the standard 

that must be used in determining the effect of an indemnity 

clause on a party's liability under laws subsequently enacted to 

protect the environment. We part ways with the magistrate judge 

and the district court, however, in the application of this 

standard to the provision at hand. We agree with Beazer that 

Paragraph 4(c) of this agreement does not plainly and 

unambiguously require it to indemnify Mead for cleanup costs at 

the Coke Plant, and therefore reverse the order of the district 

court granting Mead summary judgment, vacate the order which 

dismisses Beazer's claim for contribution and remand for further 

proceedings consistent with this opinion. On remand the district 

court will have to consider both parties' contribution claims, 

and determine the proper apportionment of CERCLA liability. 

 I. Factual & Procedural History
 Mead's predecessor, the Woodward Corporation, operated 

the Woodward Facility as a coke and coke-by products 

manufacturing facility from 1905 until 1968. In 1968, the 

Woodward Iron Company merged with Mead. Mead, in turn, operated 

the Coke Plant until 1974, when it sold the facility and 

surrounding land to Beazer's predecessor, Koppers Company, Inc. 

("KCI"). KCI purchased the Coke Plant under the Agreement in 

question. Paragraph 4 of the Agreement provides that KCI, as 

buyer, or its successors, will assume certain agreements and 

liabilities. It reads: 

 As of the Closing Date, Buyer shall assume 

and agree to perform: 

 a. . . . all other commitments, 

liabilities and obligations expressly assumed 

by Buyer pursuant to this Purchase Agreement. 

* * * 

 c. Obligations of the Coke Plant to 

comply from and after the Closing Date with 

all of the terms and conditions of any NPDES 

permit issued by the United States 

Environmental Protection Agency or the then 

permitting authority, any permit or order 

issued by the Alabama Water Improvement 

Commission and the Alabama Air Pollution 

Control Commission of the State of Alabama or 

any successor authority, any license, permit 

or order issued by the Jefferson County 

Department of Health, and of any other 

wastewater or runoff water discharge permit, 

license or order, air pollution permit, 

license or order, solid waste disposal 

permit, license or order, hereafter issued by 

the United States Environmental Protection 

Agency and/or by the State of Alabama and/or 

any of its political subdivisions, all in 

accordance with applications now pending and 

listed on Exhibit F hereto. 
App. at 22-23. Exhibit F contains a "List of Environmental 

Applications and Permits." It is divided into two parts, one for 

permits related to air and one for permits related to water. 

Exhibit F lists no permits related to solid waste. All the 

listed permits refer to their date of issuance and the issuing 

authority. 

 Paragraph 8(a) of the Agreement requires Mead, the 

seller, to indemnify Beazer, the buyer, against certain other 

liabilities. It provides: 

 a. Indemnity Against Unassumed 

Liabilities. Mead hereby indemnifies Buyer 

against and hereby agrees to hold Buyer 

harmless from and to reimburse Buyer for any 

and all liabilities, losses, damages, costs 

of settlement and expenses . . . which may be 

imposed upon or incurred by Buyer in 

connection with any liabilities or 

obligations of Mead other than those 

expressly assumed by Buyer. 

App. at 29. 

 Paragraph 8(b), on the other hand, requires Beazer, as 

the buyer's successor, to indemnify Mead, as seller's successor, 

against other liabilities, including whatever liabilities 

paragraph 4(c) imposes on the buyer. It reads: 

 b. Indemnity Against Assumed 

Liabilities. Buyer hereby indemnifies Mead 

against and hereby agrees to hold Mead 

harmless from and to reimburse Mead for any 

and all liabilities, losses, damages, costs 

of settlement and expenses . . . which may be 

imposed upon or incurred by Mead in 

connection with any liabilities or 

obligations of Mead and/or the Coke Plant 

assumed by Buyer under this Purchase 

Agreement. 
App. at 30. 

 In 1977, KCI transferred the Coke Plant and surrounding 

land to the Industrial Development Board of the City of 

Fairfield, Alabama ("IDB"). In turn, IDB leased the premises 

back to KCI. KCI continued to operate the facility. In 1988, 

Beazer acquired KCI and transferred the lease to a newly created 

corporation, Koppers Industries, Inc. ("KII"). At about this 

same time IDB transferred its ownership interest in the Coke 

Plant and the surrounding land back to KII. 

 In 1981, the United States Environmental Protection 

Agency ("EPA") and the Alabama Department of Environmental 

Management began to investigate the Coke Plant site for toxic 

substances. As a result, EPA asked Beazer to sign an 

Administrative Order on Consent (the "Order") that would require 

Beazer to do a site-wide environmental investigation and 

eventually cleanup the site. On June 21, 1991, Beazer signed the 

Order. Issued pursuant to the Solid Waste Disposal Act, it 

identifies thirty-nine problem areas at the Coke Plant. The 

Order calls each of them a "solid waste management unit." Beazer 

agreed to test each of these units for the presence of toxic 

wastes and then clean them up as necessary. 

 On March 6, 1991, Beazer filed this action. The 

complaint, following amendment and dismissal of several counts, 

claimed contribution from Mead against any response costs Beazer 

incurred under CERCLA, 42 U.S.C.A. §§ 9607(a), 9613(f), or 
indemnification from Mead based on Paragraph 8(a) of the 

Agreement. Under the Agreement's indemnification provisions, 

Beazer claimed that the expense of investigating the toxicity of 

these areas and cleaning them up was ultimately Mead's 

responsibility. Beazer also alleged that many of the solid waste 

management units it agreed to cleanup are parts of the site that 

Mead had dedicated to waste management but Beazer had never 

utilized while it was operating the facility. 

 Mead denied any obligation either to indemnify Beazer 

against these costs or to contribute to the cost of testing, 

investigating or cleaning up the site. It also asserted a 

counterclaim under Paragraph 4(c) of the Agreement demanding that 

KCI and Beazer, as KCI's successor in interest, indemnify Mead, 

hold it harmless and reimburse it for all response costs that 

investigation and cleanup of toxic wastes deposited on or in the 

Coke Plant or its environs may require. In another counterclaim, 

Mead asserted, in the alternative, a right to contribution from 

Beazer for any CERCLA costs Mead might be required to pay. 

 Beazer filed a motion for a partial summary judgment 

seeking a declaration that Mead was a responsible operator under 

sections 107(a) and 113(f) of CERCLA, and that Paragraph 8(a) of 

the Agreement required Mead to indemnify Beazer against liability 

for all response costs. Mead filed a cross-motion for summary 

judgment asserting that Paragraph 4(c) of the Agreement relieved 

it of any obligation to indemnify Beazer or contribute to any 

cleanup costs Beazer might incur, and that Paragraphs 4(c) 
and 8(b) combined to obligate Beazer to indemnify Mead against 

any CERCLA response costs Mead might incur. 

 The magistrate judge to whom the district court had 

referred these motions issued a report recommending that Mead be 

held liable as a "responsible party" for any government paid 

response costs, that Mead's cross-motion for summary judgment 

against Beazer be granted and that Beazer's action be dismissed 

in its entirety. Beazer filed timely objections, but the 

district court adopted the Magistrate's Report as its opinion, 

granted Mead's cross-motion for summary judgment and dismissed 

all of Beazer's claims. Beazer filed this timely appeal. 
 II. Jurisdiction & Standard of Review

 The district court had subject matter jurisdiction over 

this case under 28 U.S.C.A. §§ 1331, 1332, 1367 (West 1993) and 

42 U.S.C.A. § 9613(b) (West Supp. 1993). We have appellate 

jurisdiction over the district court's final order dismissing 

Beazer's claims and granting Mead's counterclaim under 28 

U.S.C.A. § 1291 (West 1993). 

 We exercise plenary review over a district court's 

grant of summary judgment. Viewing the evidence in the light 

most favorable to the non-moving party, we must determine whether 

there remain any genuine issues of material fact and, if not, 

whether the moving party is entitled to judgment as a matter of 

law. See Bank of Nova Scotia v. Equitable Fin. Management, Inc., 

882 F.2d 81, 83 (3d Cir. 1989). 

 III. Analysis

 Section 9607(e)(1) of CERCLA provides: 

 No indemnification, hold harmless, or similar 

agreement or conveyance shall be effective to 

transfer from the owner or operator of any 

vessel or facility or from any person who may 

be liable for a release or threat of release 

under this section, to any other person the 

liability imposed under this section. 

Nothing in this subsection shall bar any 

agreement to insure, hold harmless, or 

indemnify a party to such agreement for any 

liability under this section. 

42 U.S.C.A. § 9607(e)(1) (West 1983). On first reading, this 

appears internally inconsistent. We have reconciled its two 

sentences by construing them to mean "agreements to indemnify or 
hold harmless are enforceable between the parties but not against 

the government." Smith Land & Improvement Corp. v. Celotex 

Corp., 851 F.2d 86, 89 (3d Cir. 1988), cert. denied, 488 U.S 1029 

(1989); see also United States v. Hardage, 985 F.2d 1427, 1433 

(10th Cir. 1993) (Under section 9607(e)(1) "responsible parties 

may not altogether transfer their CERCLA liability, [but] they 

have the right to obtain indemnification for that liability.") 

(citations omitted) (emphasis in original). As the district 

court recognized in Hatco Corp. v. W.R. Grace & Co.--Conn., 801 

F. Supp. 1309 (D.N.J. 1992): 

 Because § 9607(e)(1) renders ineffective any 

attempt to completely "transfer" liability, 

the most a party can do to limit its 

liability under CERCLA is to obtain from 

another an agreement "to insure, hold 

harmless, or indemnify" it from any 

liabilities established against it. 

Id. at 1317 (quoting 42 U.S.C.A. § 9607(e)(1)). 

 Thus, Beazer could have lawfully agreed to indemnify 

Mead for its CERCLA liability or, conversely, Mead could have 

lawfully agreed to indemnify Beazer. The issue is whether either 

did so. The Agreement the parties rely on was executed before 

CERCLA was enacted. Therefore, we must, at the outset, resolve 

the preliminary issue of whether a contract of indemnity that 

predates CERCLA can be construed to include indemnity against 

CERCLA liability. This is a question of first impression in this 

Court. 

 Other courts that have analyzed pre-CERCLA indemnity 

provisions have uniformly held that a pre-CERCLA agreement can 
require one party to indemnify another against CERCLA liability. 

See, e.g., Kerr-McGee Chem. Corp. v. Lefton Iron & Metal Co., 14 

F.3d 321, 327 (7th Cir. 1994); Hatco Corp., 801 F. Supp. at 1317-

18; Purolator Prods. Corp. v. Allied-Signal, Inc., 772 F. Supp. 

124, 132 (W.D.N.Y. 1991); Mobay Corp. v. Allied-Signal, Inc., 761 

F. Supp. 345, 356-58 (D.N.J. 1991). We find the reasoning of 

these courts persuasive. Accordingly, we hold that a pre-CERCLA 

agreement can require an indemnitor to hold the indemnitee 

harmless from CERCLA liability. 

 Nevertheless, not all pre-CERCLA promises to indemnify 

cover CERCLA liability. We must look to see whether an 

indemnification provision is either specific enough to include 

CERCLA liability or general enough to include any and all 

environmental liability which would, naturally, include 

subsequent CERCLA claims. The first step in this inquiry is to 

determine what law applies to the construction or interpretation 

of contractual provisions that affect responsibilities Congress 

has imposed on us in statutes enacted to enforce this nation's 

strong commitment to a clean, safe and attractive environment. 

We now turn to this issue, also one of first impression in this 

Court. 

A. 

 In deciding what law to apply to determine whether 

Paragraphs 4(c) and 8(a) establish an obligation for Beazer to 

indemnify Mead against CERCLA liability or Mead to indemnify 

Beazer, the magistrate judge looked first to the law the parties 
chose in Paragraph 13(k)(1) of the Agreement. It provides that 

Alabama law will govern.1 Seeing "no reason to frustrate the 

obvious and expressed intent of the parties," the magistrate 

judge said he would apply Alabama law to decide whether the 

Agreement's indemnity provisions were clear enough to require 

Beazer to hold Mead harmless against CERCLA liability at the 

site. Magistrate Judge's Report at 9. 

 Finding no Alabama law directly on point, the 

magistrate judge took a cue from the holdings of the United 

States District Court for the District of New Jersey that preCERCLA agreements may cover CERCLA liability if such agreements 

are "worded broadly enough to encompass any and all liabilities, 

or if environmental liability is clearly referred to in the 

agreement." Id. at 9-10 (citing Hatco Corp., 801 F. Supp. at 

1318; Purolator Prods. Corp., 772 F. Supp. at 132; Mobay Corp., 

761 F. Supp. at 356; Southland Corp. v. Ashland Oil Inc., 696 

F. Supp. 994 (D.N.J. 1988)). After concluding that Alabama law 

on the meaning of contracts was not inconsistent with this 

developing standard of federal common law, the magistrate judge 

saw no impediment to interpreting the Agreement under Alabama 

contract law. Nevertheless, he pointed out that construction or 

interpretation of a pre-CERCLA indemnity clause's effect on 

CERCLA liability might "be an issue best determined by a uniform 

 

1. The paragraph states, "Each of the parties elects that this 

Purchase Agreement shall be governed, construed and enforced in 

accordance with the laws of the State of Alabama." App. at 44-

45. 
federal rule . . . and that the federal case law establishing the 

standard under CERCLA may override any inconsistent state law in 

this respect." Id. at 10 n.2. 

 The first question that we should ask is whether the 

national interest in uniform application of federal statutory law 

requires federal courts to develop a federal common law to 

preclude willy-nilly use of various state law principles in 

interpreting or construing indemnification provisions that affect 

liabilities under CERCLA. Cf. O'Melveny & Myers v. Federal 

Deposit Insurance Corp., 114 S. Ct. 2048, 2052-55 (1994). 

 Generally, federal law governs the validity of an 

agreement releasing a cause of action arising under federal law; 

see Dice v. Akron, Canton & Youngstown R.R. Co., 342 U.S. 359, 

361 (1952), but the construction or interpretation of a private 

contract is generally thought to be a question of state law. 

Accordingly, most courts have recognized that imposition of 

CERCLA liability on a successor corporation is a question of 

federal law. See, e.g., John S. Boyd, Co. v. Boston Gas. Co., 

992 F.2d 401, 406 (1st Cir. 1993); Mardan Corp. v. C.G.C. Music, 

Ltd., 804 F.2d 1454, 1457 (9th Cir. 1986); HRW Sys., Inc. v. 

Washington Gas Light Co., 823 F. Supp. 318 326-28 (D. Md. 1993); 

Chesapeake & Potomac Tel. Co. v. Peck Iron & Metal Co., 814 

F. Supp. 1266, 1267-68 (E.D. Va. 1992). 

 Nevertheless, all of the courts of appeals that have 

considered developing a federal rule of decision appear to have 

decided it is better to look to state law in interpreting or 
construing a contract's indemnification provisions vis-á-vis 

CERCLA.2

 In John S. Boyd Co., the United States Court of Appeals 

for the First Circuit looked to the Massachusetts law of 

contracts to apportion CERCLA liability among contracting parties 

inter se. In construing the parties' written agreement, it said, 

"state contract law . . . provide[s] the substantive rule, so 

long as it is not hostile to the federal interests animating 

CERCLA." John S. Boyd Co., 992 F.2d at 406 (citations omitted); 

Hardage, 985 F.2d at 1433 n.2 ("Because the government's 

interests are unaffected by the allocation of liability between 

jointly and severally liable parties, we easily conclude that a 

uniform federal rule is unnecessary and that state law will 

govern the indemnification clauses."); see also O'Melveny, 114 

S. Ct. at 2055 ("Our cases uniformly require the existence of [a 

 

2. See John S. Boyd Co., 992 F.2d at 406 (incorporating state 

law into federal law to construe an agreement pertaining to 

CERCLA liability); Olin Corp. v. Consolidated Aluminum Corp., 5 

F.3d 10, 15 (2d Cir. 1993) (state law supplies the principles 

that govern the construction or interpretation of indemnification 

clause applicable to CERCLA liability); Hardage, 985 F.2d at 1433 

& n.2; Mardan Corp., 804 F.2d at 1458, 1460 (holding that federal 

courts should look to applicable state law to decide the validity 

of releases of claims under CERCLA); see also City of Phoenix, 

Az. v. Garbage Servs. Co., 827 F. Supp. 600, 602-03 (D. Ariz. 

1993) ("When developing federal common law, the court must decide 

whether to fashion a nationally uniform federal rule, or 

incorporate state law as the federal rule of decision. . . . The 

Ninth Circuit Court of Appeals has taken both approaches when 

filling in the gaps left by CERCLA, depending on the context.") 

(citations omitted); cf. HRW Sys. Inc., 823 F. Supp. at 328 

(adopting federal "continuity of enterprise test endorsed by 

Fourth Circuit rather than state law to determination of 

corporate successor liability); Chesapeake & Potomac Tel., 814 

F. Supp. at 1268 (same). 
significant conflict between some federal policy or interest and 

the use of state law] as a precondition for recognition of a 

federal rule of decision."). 

 The United States Court of Appeals for the Ninth 

Circuit has analyzed the issue of choosing state or federal 

common law to determine whether private indemnification 

agreements cover CERCLA liability in depth. See Mardan Corp., 

804 F.2d at 1458-60. In Mardan Corp., the government, in an 

amicus brief, argued for state law to provide the substance of 

the decision rule. It said that "whether and when agreements 

between private 'responsible parties' can settle disputes over 

contribution rights under [CERCLA]" did not require the 

development of a uniform federal rule. Id. at 1458. The court 

of appeals stated: 

 [S]ection [9607(e)(1)] expressly preserves 

agreements to insure, to hold harmless, or to 

indemnify a party held liable under [CERCLA]. 

Absent CERCLA, these contracts would be 

interpreted under state law. By preserving 

such agreements, Congress seems to have 

expressed an intent to preserve the 

associated body of state law under which 

agreements between private parties would 

normally be interpreted. Certainly federal 

courts need not fashion federal common law to 

interpret every settlement of liability that 

arises under federal statutes. 

Id.

 Because Congress's intent to require a federal rule of 

decision was "not entirely clear," the court of appeals 

considered whether the policies Congress sought to advance by 
enacting CERCLA required a uniform federal standard for the 

interpretation and construction of indemnity clauses. For 

guidance it looked to the Supreme Court's opinion in United 

States v. Kimbell Foods, Inc., 440 U.S. 715 (1979). Id. Kimbell 

Foods set out the factors courts should use to determine when a 

uniform federal rule is needed to decide federal claims based on 

federal statutes when Congress has not made clear its intent on 

what law should supply a rule of decision. See Kimbell Foods, 

440 U.S. at 728-29. They are: 

 (1) whether the issue requires "a nationally 

uniform body of law"; (2) "whether 

application of state law would frustrate 

specific objectives of the federal programs"; 

and (3) whether "application of a federal 

rule would disrupt commercial relationships 

predicated on state law." 

Mardan Corp., 804 F.2d at 1458 (citing Kimbell Foods, 440 U.S. at 

728-29). The court of appeals in Mardan Corp. applied Kimbell 

Foods and concluded there was no need for a federal common law 

standard. It stated: 

 First, we find no reason to think that 

the issue requires a uniform body of law. 

Commercial enterprises selling their assets 

or insuring themselves will normally look to 

state law to interpret their indemnification 

provisions, which will generally indemnify 

the enterprises against a whole host of 

possible liabilities. Disuniformity does not 

seem to impose any particular burden. . . . 

 Second, the application of state law to 

interpret such releases will not frustrate 

the objectives of CERCLA. Contractual 

arrangements apportioning CERCLA liabilities 

between private "responsible parties" are 

essentially tangential to the enforcement of 

CERCLA's liability provisions. Such 
agreements cannot alter or excuse the 

underlying liability, but can only change who 

ultimately pays that liability. . . . 

* * * 

 Finally, we are convinced that 

application of a federal rule . . . would 

disrupt commercial relationships predicated 

on state law. . . . Creating a federal rule 

to govern CERCLA releases would introduce 

confusion and uncertainty into these 

commercial relationships in two respects. 

One, buyers and sellers would face greater 

confusion about which body of law to turn to. 

Two, the creation of a federal rule, as 

opposed to incorporating a ready-made and 

fully fleshed out body of state law, would, 

during the development of that federal rule, 

leave parties very uncertain about what rule 

governed CERCLA releases. . . . 

Id. at 1458-60. 

 Judge Reinhardt, in a dissent in Mardan Corp., thought 

that a uniform federal rule should be applied to determine 

whether any particular agreement indemnified against CERCLA 

liability. Mardan Corp., 804 F.2d at 1463 (Reinhardt, J. 

dissenting). Citing cases that adopted uniform federal rules to 

determine liability under section 9607 and the legislative 

history of that section stressing the need for "'a uniform rule 

of law . . . to discourage business[es] dealing in hazardous 

substances from locating primarily in states with more lenient 

laws,'" Judge Reinhardt reasoned that "a uniform federal rule 

regarding releases from CERCLA liability serves Congress' goals 

in the same manner that a uniform rule regarding liability does." 

Id. at 1464 (citing 5 U.S.C.C.A.N. 6119, 6119-20, 6132 (1980) and 
quoting 126 Cong. Rec. H11787 (daily ed. Dec. 3, 1980) (statement 

of Representative Florio, CERCLA House sponsor) (alteration in 

original)). But see id. at 1459-60 (majority opinion) (arguing 

that parties are still fully liable to the government regardless 

of applicable law and concluding that adoption of state law does 

not conflict with congressional purpose underlying CERCLA). 

 Though this Court has yet to consider what law should 

govern the construction or interpretation of any particular 

indemnity provision on the apportionment of CERCLA liability 

among contracting parties, we have adopted a federal common law 

standard in other environmental contexts.3 In Smith Land & 

Improvement Corp. v. Celotex Corp., we stressed the need for 

uniform standards if CERCLA is to be effective and indicated that 

a district court considering successor liability under CERCLA 

should look to "[t]he general doctrine of successor liability in 

operation in most states . . . rather than the excessively narrow 

statutes which might apply in only a few states." Smith Land & 

Improvement Corp., 851 F.2d at 92. We reasoned if we refused to 

apply uniform federal standards to regulate CERCLA liability, 

"CERCLA aims may be evaded easily by a responsible party's choice 

to arrange a merger or consolidation under the laws of particular 

states which unduly restrict successor liability." Id. In 

Lansford-Coaldale Water Authority v. Tonolli Corp., 4 F.3d 1209 

 

3. It is perhaps material to note that these standards do not 

spring full formed and grown from the heads of federal judges as 

Athena did from Zeus nor does any Delphic oracle whisper 

uniformly in each judge's ear. See Manfred Lurker, Dictionary of 

Gods & Goddesses, Devils & Demons 44-45 (1987) 
(3d Cir. 1993), we also expressed a preference for uniform 

federal standards to govern CERCLA liability. We held that 

"given the federal interest in uniformity in the application of 

CERCLA, it is federal common law, and not state law, which 

governs when corporate veil-piercing is justified under CERCLA." 

Id. at 1225 (citations omitted). 

 None of our cases, however, deal with the need for a 

federal standard in interpreting or construing contracts to 

indemnify and our sister courts of appeals have uniformly 

selected state law. See supra note 2. Fortunately we see no 

need to create a circuit conflict and will join the other courts 

of appeals that look to the law of a particular state concerning 

the construction or interpretation of contracts of indemnity to 

determine whether a particular indemnification provision covers 

CERCLA liability. We thus endorse the majority's reasoning and 

application of the Kimbell Foods test in Mardan Corp.

 Moreover, we see support for this principle in the 

Supreme Court's recent decision in O'Melveny & Myers. It teaches 

us that special federal rules are justified only in "situations 

where there is a 'significant conflict between some federal 

policy or interest and the use of state law.'" O'Melveny & 

Myers, 114 S. Ct. at 2055 (quoting Wallis v. Pan American 

Petroleum Corp., 384 U.S. 63, 68 (1966)). 

 In O'Melveny & Myers, the Supreme Court considered 

whether federal or state decisional law should govern the 

question of imputation of knowledge in a suit where the FDIC sued 

in its capacity as receiver for a federally insured bank that had 
failed. The FDIC argued that Kimbell Foods required the district 

court to apply a uniform federal rule of decision to determine 

FDIC's rights because "federal law governs questions involving 

the rights of the United States under nationwide federal 

programs." O'Melveny & Myers, 114 S. Ct. at 2053 (quoting 

Kimbell Foods, 440 U.S. at 726). The Supreme Court first stated, 

"[T]he FDIC is not the United States, and even if it were we 

would be begging the question to assume that it was asserting its 

own rights rather than, as receiver, the rights of [the failed 

bank.]" Id. (emphasis added). It went on to note, "The rules of 

decision at issue here do not govern the primary conduct of the 

United States or any of its agents or contractors, but affect 

only the FDIC's rights and liabilities, as receiver, with respect 

to primary conduct on the part of private actors that has already 

occurred." Id. at 3055 (emphasis added). The Supreme Court then 

held that the issue of imputed knowledge in bank receivership 

cases "is not one of those extraordinary cases in which the 

judicial creation of a federal rule of decision is warranted." 

Id. at 2056. 

 How Beazer and Mead apportion their CERCLA liability 

among themselves does not affect the primary duty they owe the 

United States to clean up the poisons left to befoul the site 

both used. Whether one must indemnify the other concerns instead 

the liability of private actors for acts already done, just as 

the liability of the alleged tortfeasor in O'Melveny involved the 

FDIC's right, as successor to the private right of an injured 

party, to recover for the injuries its predecessor had suffered 
as a result of past acts. How much Beazer or Mead pay each other 

seems to us to have even less effect on the United States than 

did the ability of FDIC to recover for tort injuries suffered by 

the failed bank it took over. The interpretation and 

construction of Paragraph 4(c) has no impact on either party's 

liability to the government. See Smith Land & Improvement Corp., 

851 F.2d at 89. On reason as well as authority, we therefore 

hold that state law should determine whether any particular 

contract of indemnity provision can be construed generally or 

broadly enough to cover one responsible party's liability to 

another. 

B. 

 Having determined that state law on the interpretation 

and construction of indemnification agreements applies to this 

case, we turn to the question of what state law should be 

applied. On that issue, we can quickly agree with the district 

court and apply Alabama law.4

 

4. We again note the magistrate judge, despite his summary 

conclusion that Alabama law controls, seems to have applied the 

standard adopted by the United States District Court for the 

District of New Jersey. That court has used a federal standard 

to conclude that an indemnification or release provision which 

affects a party's CERCLA liability must be: 

 (1) a broad waiver of "all liabilities of any

type whatsoever" . . . which would clearly 

evince the parties' broad intent to finally 

settle all present and future liability 

issues arising from the sale,; or (2) at a 

minimum, "must at least mention that one 

party is assuming [all] environmental-type 

liabilities" . . . which would clearly evince 
 We look to decisions of the Alabama courts and 

especially those of the Supreme Court of Alabama. Its most 

recent decision concerning the interpretation or construction of 

indemnification provisions is Nationwide Mutual Insurance Co. v. 

Hall, Nos. 1921128 & 1921272, 1994 WL 107547 (Ala. April 1, 

1994). There, it held that indemnification agreements are 

enforceable in Alabama if "'the parties knowingly, evenhandedly, 

and for valid consideration, intelligently enter into an 

agreement whereby one party agrees to indemnify against the 

indemnitee's own wrongs, [and if that agreement is] expressed in 

clear and unequivocal language." Nationwide Mut. Ins. Co., 1994 

WL 107547 at *3 (quoting Industrial Tile, Inc. v. Stewart, 388 

So.2d 171, 175-76 (Ala. 1980), cert. denied, 449 U.S. 1081 (1981) 

(alteration in original)). In Nationwide, Alabama's supreme 

court recognized that indemnity agreements covered only those 

incidents within their plain meaning and the court expressed a 

strong preference for this limitation. Id. (quoting Craig 

Constr. Co. v. Hendrix, 568 So.2d 752, 757 (Ala. 1990); 

Industrial Tile, Inc., 388 So.2d at 176). The supreme court then 

stated that "an indemnity contract purporting to indemnify for 

the consequences of the indemnitee's own negligence is 

(..continued) 

the parties' intent to settle all issues 

related to present and future environmental 

liabilities. 

Hatco Corp., 801 F. Supp. at 1317-18 (quoting and citing Mobay 

Corp., 761 F. Supp. at 358 & n.15) (emphasis in original). The 

magistrate judge states, however, that he used this standard 

because it is consistent with Alabama law. 
unambiguous, and therefore, enforceable when its language 

specifically refers to the negligence of the indemnitee. . . . 

[but that] such 'talismanic' or thaumaturgic language is not 

necessary if the requisite intent is otherwise clear." Id.

(citations omitted).5

 We conclude that Alabama law requires a plain and 

unambiguous expression of intent to cover the cost of the 

liability in question. Using this standard, we now consider 

whether Paragraph 4(c) unambiguously expresses Beazer's intent to 

indemnify Mead against CERCLA liability. 

C. 

 The crux of the parties' argument concerns the district 

court's conclusion that Beazer expressly and unambiguously agreed 

to indemnify Mead for its CERCLA liability.6 They disagree as to 

whether the magistrate judge correctly applied Alabama's limiting 

standard to the Agreement. Paragraph 4(c) reads: 

 4. Assumption of Agreements and Liabilities

 As of the Closing Date, Buyer [Beazer] shall 

assume and agree to perform: 

* * * 

 c. Obligations of the Coke Plant to comply 

from and after the Closing Date with all 

 

5. We do not think Alabama would apply a different rule in 

deciding whether an indemnity clause covers strict liability 

under environmental law. 

6. Whether an agreement is unambiguous is a question of law. 

McDonald v. U.S. Die Casting & Dev. Corp., 585 So. 2d 853, 855 

(Ala. 1991). 
of the terms and conditions of . . . any 

solid waste disposal permit, license or 

order, hereafter issued by the United 

States Environmental Protection Agency 

. . . all in accordance with 

applications now pending and listed on 

Exhibit F hereto. 

App. at 23.7 Exhibit F is divided into two parts. Beazer argues 

that Paragraph 4(c) limits its agreement to assume Mead's 

environmental liabilities to the permits mentioned in Exhibit F's 

"List of Environmental Applications and Permits." Because 

neither part of Exhibit F mentions any solid waste permit, Beazer 

contends that Paragraph 4(c)'s promise to indemnify does not 

unambiguously cover CERCLA response costs incurred in removing 

any toxic wastes found in or around the Coke Plant. 

 After concluding that Paragraph 4(c) did not 

unambiguously rule out a promise to indemnify Mead against CERCLA 

 

7. Beazer's duty to indemnify is controlled by Paragraph 8(b) of 

the Agreement which provides: 

 Buyer [Beazer] hereby indemnifies Mead 

against and hereby agrees to hold Mead 

harmless from and to reimburse Mead for any 

and all liabilities, losses, damages, costs 

of settlement and expenses . . . which may be 

imposed upon or incurred by Mead in 

connection with any liabilities or 

obligations of Mead and/or the Coke Plant 

assumed by Buyer under this Purchase 

Agreement. 

App. at 30. The obligations imposed by Paragraph 4 constitute 

"liabilities or obligations . . . assumed by Buyer [Beazer] under 

this Purchase Agreement." Id. Thus, if Paragraph 4 encompasses 

CERCLA liability, Beazer would be required to indemnify Mead 

under Paragraph 8(b) of the Agreement. 
liability, the magistrate judge went on to consider whether it 

unambiguously required Beazer to indemnify Mead for CERCLA 

liability under the federal standard announced in Mobay Corp. He 

acknowledged that Paragraph 4(c) was not a broad, general promise 

to indemnify Mead against all liability. Nevertheless, he 

concluded that the text of the paragraph 

 clearly implies that, as between Beazer and 

Mead, Beazer would be responsible for any 

environmental liability arising from the 

Woodward Facility after the date of the sale. 

Even more than this implication regarding all 

environmental liability, the provision 

expressly provides that Beazer will be 

responsible for complying with orders issued 

by the EPA regarding solid waste. 

Magistrate Judge's Report at 15. The magistrate judge construed 

Paragraph 4(c) as a promise by the buyer and its successors to 

indemnify the seller and its successors against all environmental 

liabilities associated with the Coke Plant. 

 In doing so, the magistrate judge decided that 

Paragraph 4(c)'s textual reference to future "orders" issued by 

state, local, and federal agencies contradicted the more 

restrictive interpretation of Paragraph 4(c) which Beazer would 

have us infer from the specific list of permits mentioned in 

Exhibit F Paragraph 4(c). If Paragraph 4(c) were confined to the 

permits listed in Exhibit F, the magistrate judge reasoned that 

Paragraph 4(c)'s reference to permits, licenses, and orders 

"hereafter issued" would be meaningless. Thus, he concluded that 

Paragraph 4(c) did include all subsequent orders, permits, and 

licenses relating to environmental liability including those 
required or issued under CERCLA. Accordingly, the magistrate 

judge made the recommendation the district court accepted in 

granting summary judgment to Mead and dismissing Beazer's claim 

for contribution under CERCLA. 

 Paragraph 4(c) does expressly make Beazer responsible 

for "solid waste . . . permits issued by [EPA]," but it has as 

additional limiting language; "all in accordance with 

applications now pending and listed on Exhibit F hereto." 

Therefore, Beazer contends that the magistrate judge erred when 

he concluded that Paragraph 4(c) clearly and unambiguously 

transferred Mead's CERCLA liability to Beazer. Beazer first 

argues that Paragraph 4(c) is no more than a "window" provision, 

common in commercial agreements for the sale of assets, which 

gives a seller interim protection against a buyer's failure to 

comply with the conditions of any existing environmental permits 

that are specifically listed, as they are here in Exhibit F. 

Thus, Beazer argues that the magistrate judge erred when he 

failed to consider the parties' basic decision to structure the 

sale as a purchase of assets. Beazer would have us infer that 

the decision to buy and sell assets was mutually agreed on for 

the express purpose of limiting the purchaser's liability. We 

think Beazer's argument that purchasers under asset purchase 

agreements normally assume only those debts, obligations, and 

liabilities of the seller that are expressly identified in the 

agreement is plausible and that the district court's holding that 

Beazer must indemnify Mead would be inconsistent with that 

purpose. Nevertheless, we have been unable to find any evidence 
in this record that would unambiguously confirm that 

interpretation, and the text of Paragraph 4(c) is at least 

arguably to the contrary. Cf. Watts v. TI, Inc., 561 So.2d 1057, 

1059-60 (Ala. 1990). Therefore, we conclude that Beazer's 

argument about the nature and purpose of framing a transfer of a 

business enterprise as a sale of assets begs the question on 

Paragraph 4(c)'s meaning. 

 Beazer's argument that the language of Paragraph 4(c) 

is not clear enough to transfer Mead's CERCLA liability to Beazer 

under Alabama law is more telling. We conclude Paragraph 4(c) is 

ambiguous under the principles of Alabama law that guides 

determinations of contracts. See Reeves Cedarhurst Dev. Corp. v. 

First Amfed Corp., 507 So. 2d 184, 186 (Ala. 1992) ("An 

instrument is unambiguous if only one reasonable meaning clearly 

emerges.") (quoting Vainrib v. Downey, 565 So. 2d 647, 648 (Ala. 

Civ. App. 1990). The provision is subject to more than one 

reasonable interpretation, and it is not plain enough to be 

construed as an unambiguous promise by Beazer to indemnify Mead 

against all environmental liability associated with the site of 

the Coke Plant, including liability without fault under laws like 

CERCLA, yet to be passed. Therefore, it does not square with the 

principle of Alabama law that promises to indemnify are limited 

to subjects plainly expressed. 

 Moreover, cases outside Alabama which have held a 

release or indemnification provision covers CERCLA liability have 

all involved indemnity clauses with much broader and more 

inclusive language than here. See, e.g., Kerr-McGee Chem. Corp., 
14 F.3d at 326-27; Olin Corp., 5 F.3d at 12-13; Hardage, 985 F.2d 

at 1434; Niecko v. Emro Mktg. Co., 973 F.2d 1296, 1300 (6th Cir. 

1992); Mardan Corp., 804 F.2d at 1461-62. The Olin Corp. case 

provides one recent example.8 The court of appeals held that 

 

8. The sale agreement in Olin Corp. originally provided: 

 [The buyer] hereby assumes and agrees to be 

responsible for and to pay, perform, 

discharge and indemnify [the seller] against, 

all liabilities (absolute or contingent), 

obligations and indebtedness of [the seller] 

related to the Aluminum Assets . . . as they 

exist on the Effective Time or arise 

thereafter with respect to actions or 

failures to act occurring prior to the 

Effective Time. 

Olin Corp., 5 F.3d 12-13. A later agreement in Olin Corp.

stated: 

 In consideration of the payment on this date 

by [the seller] to [the buyer] of $3,700,000 

. . . [the buyer] hereby releases and settles 

all claims of any nature which [it] now has 

or hereafter could have against [the seller] 

. . . whether or not previously asserted, 

under or arising out of the Purchase 

Agreement . . ., or the transactions 

contemplated thereby. 

Id. at 13 (footnote omitted). 

 In the Kerr-McGee case the indemnification clause read: 

 [The purchaser] expressly agrees to indemnify 

and to defend and hold [plaintiff's 

predecessor Moss-American], its officers, 

employees, and agents, free and harmless from 

and against any and all claims, damages, 

judgments, fines, penalties, assessments, 

losses, expenses, including interest, court 

costs and attorney fees, however the same may 

be caused, arising out of or resulting from, 

directly or indirectly, the following: (a) 

the purchase, dismantling or sale of the 
this provision evidenced a "clear and unmistakable intent" to 

transfer the seller's environmental liability to the buyer, even 

future and unknown liability. Olin Corp., 5 F.3d at 15-16. 

 The court of appeals held: 

 In no uncertain terms, [the purchaser] agreed 

to assume the liability for losses resulting 

from "the maintenance of any . . . claim 

. . . concerning pollution or nuisance 

. . . ." The indemnity provision covers all 

pollution and nuisance claims without 

limitation . . . . [and makes the purchaser] 

responsible for any liability imposed . . . 

under CERCLA. 

Id. at 327 (footnote omitted). 

 The contradictory terms and references of this 

Agreement leave us with no firm conclusion as to the clear and 

unmistakable intent of the parties. Under applicable principles 

of Alabama law, the parties failed to express the intent to 

indemnify with the requisite clarity. We hold, therefore, that 

Paragraph 4(c) is not specific enough to impose on Beazer a duty 

to indemnify Mead for their CERCLA response costs. 

(..continued) 

personal property and real property by [the 

purchaser]; (b) the maintenance of any 

action, claim or order concerning pollution

or nuisance; and (c) the use by [the 

purchaser] or its employees or agents of the 

personal property and real property. 

Kerr-McGee Chem. Corp., 14 F.3d at 326-27 (emphasis added) 

(footnote omitted). See also John S. Boyd Co., 992 F.2d at 403-

04 (construing a provision stating that "[the successor 

corporation] agreed to assume 'all the duties and liabilities of 

[its predecessor] related to [the] gas business'" and that "[the 

successor corporation] agreed to 'indemnify and save harmless 

[the predecessor corporation] from any duty or liability with 

respect to the gas business."). 
D. 

 Because Paragraphs 4(c) and 8 refer circuitously to 

each other, it follows therefore that neither Paragraph 4(c) nor 

Paragraph 8 expressly require either party to indemnify the 

other.9 Accordingly, our earlier analysis requires us to reject 

Beazer's argument that Paragraph 4(c) was intended to limit 

Beazer's assumption of liabilities to those expressly listed in 

Exhibit F, and that therefore because CERCLA is not a listed 

obligation Mead must indemnify Beazer under Paragraph 8(a). 

Beazer relies on the grammatical rule of the last antecedent to 

assert that the language "all in accordance with . . . Exhibit F" 

is a limitation on the preceding reference to "solid waste 

disposal . . . order" in support of its argument that the 

magistrate judge's construction of Paragraph 4(c)'s phrase "all 

in accordance with" Exhibit F to mean "which includes" Exhibit F 

must fail. The phrase "all in accordance with" can be 

interpreted as Beazer would have it, but it does not compel that 

construction. Beazer's contention that the magistrate judge 

erred when he concluded the limitation of Paragraph 4(c) to the 

permits expressly listed in Exhibit F would leave the words 

 

9. Mead's duty to indemnify Beazer is set forth in Paragraph 

8(a) of the Agreement. It is quoted in full supra, Part I, 

typescript at 6. It requires Mead, the seller, to indemnify 

Beazer, the buyer, against all liabilities other than those 

"expressly assumed by the Buyer." Paragraph 8(b), quoted supra

in note 7, is its mirror image. It requires Beazer, the buyer, 

to indemnify Mead, the seller, against all liabilities "assumed 

by Buyer." 
"hereafter issued" without meaning does not persuade us. As we 

have already explained, its argument that these words merely 

reflect an intent to protect the seller during a transition 

period immediately following the transfer of assets to the buyer 

fails to shine through the murky text of Paragraph 4(c). 

Beazer's suggested interpretation of the words "hereafter issued" 

as limited to permits or licenses that might result from the 

pending applications is again plausible, but not so plain as to 

justify its construction under the Alabama rule that indemnity 

provisions must be strictly construed and limited to their plain 

meaning. 

E. 

 Paragraph 4(c) does not clearly state that Beazer has 

agreed to assume all liability for toxic wastes under present or 

future laws protecting the environment. Though the phrase in 

Paragraph 4(c), "hereafter issued," appears to look to the 

future, the phrase "all in accordance with" appears to limit the 

buyer's environmental liability to orders, permits and licenses 

that are listed in the exhibit referenced. Accordingly, nothing 

in this agreement demonstrates a clear and unambiguous intent to 

transfer all CERCLA liability to Beazer. 

 Our refusal to construe Paragraph 4(c) as a clear 

promise by Beazer to indemnify Mead against CERCLA response costs 

leaves both Beazer and Mead responsible for their fair share of 

the cleanup costs associated with the Coke Plant. That result 

reinforces CERCLA policy. "Congress enacted CERCLA, a complex 
piece of legislation . . . to force polluters to pay for costs 

associated with remedying their pollution." United States v. 

Alcan Aluminum Corp., 964 F.2d 252, 258 (3d Cir. 1992). Thus, we 

will reverse the district court's entry of summary judgment in 

favor of Mead and remand this case for further proceedings on 

Beazer's contribution claim.10

 IV. CONCLUSION

 

10. Section 9613(f) provides, in relevant part: 

 Any person may seek contribution from 

any other person who is liable or potentially 

liable under section 9607(a) of this title 

. . . . In resolving contribution claims, 

the court may allocate response costs among 

liable parties using such equitable factors 

as the court determines are appropriate. 

* * * 

 A person who has resolved its liability 

to the United States or a State for some or 

all of a response action or for some or all 

of the costs of such action in an 

administrative or judicially approved 

settlement may seek contribution from any 

person who is not party to a settlement 

. . . . 

42 U.S.C.A. § 9613(f)(1), (3)(B) (West Supp. 1994). The 

magistrate judge determined that Mead was a "responsible party" 

for purposes of CERCLA liability. It declined, however, to 

apportion the response costs or reach Mead's or Beazer's 

contribution claims under section 9613(f) because it found that 

Beazer had agreed to indemnify Mead for all CERCLA liability 

under Paragraph 4(c) of the Agreement. On remand, the trial 

court will have to revisit the parties' contribution claims and 

correspondingly apportion liability for the attendant CERCLA 

response costs. 
 The order of the district court granting summary 

judgment on Mead' counterclaim and the order dismissing Beazer's 

claim for contribution will be reversed and the case will be 

remanded to the district court for further proceedings consistent 

with this opinion.